Eurozone private sector contracts as services PMI hits five-year low

(Sharecast News) - The eurozone economy slipped back into contraction in April, according to final estimates of S&P Global's monthly purchasing managers' indices, with rising prices and weakening demand painting a picture of stagflation.

The eurozone composite PMI - a weighted average of the manufacturing PMI output index and the services PMI, which acts as an early indicator of economic health - dropped to 48.8 in April, down from 50.7 in March.

While this was slightly higher than the preliminary estimate of 48.6, this marked the first dip below the neutral 50-point mark - which separates growth from contraction - in 17 months, signalling a "modest contraction" in private sector activity, S&P Global said.

The downturn was driven entirely by the services sector, where the PMI fell from 50.2 to 47.6, its lowest level in more than five years. New business also declined for a second straight month, with the drop the steepest since late 2024.

By contrast, manufacturing held up better, though this was largely attributed to stockpiling rather than underlying demand.

Meanwhile, inflation pressures intensified, with prices charged by firms rising at the fastest pace in three years, while input costs hit a 40-month high.

"The final eurozone PMI data confirm the earlier signs of an economy slipping into decline during April as the ongoing war in the Middle East derails the recovery that had been building prior to the outbreak of the conflict," said Chris Williamson, S&P Global's chief business economist.

"Although indicative of only a modest 0.1% quarterly GDP decline so far, the absence of any signs of the crisis easing any time soon suggests that the downturn may soon deepen."